HAL to look at commercial borrowing to fund new projects

The military plane-maker plans to invest Rs 17,500 cr in next 5-6 years

India’s military plane-maker Hindustan Aeronautics Limited is looking at commercial borrowings to fund part of its Rs 17,500 crore planned expenditure to build new fighters and helicopters for the armed forces.

“In the month of March, we may be going in for loans from banks to fund our projects. The overall expected investments, as of now, is approximately Rs 17,500 crores spread over the next 5-6 years,” said T Suvarna Raju, Chairman of HAL, at the 11th Aero India show in Bengaluru on Wednesday. He did not specify the quantum of debt the firm plans to raise.

The move comes at a time when the company is stepping up its Initial Public Offering plans, with efforts to file its Red Herring Prospectus with the Securities and Exchange Board of India (SEBI) before the end of the year. HAL did not share details on when it would make its debut on the public markets.

HAL plans to offer 3.615 crores of equity shares, or 10 per cent of its total equity capital in the public markets, for which efforts on arriving at a valuation are ongoing. Once the Red Herring Prospectus is filed with the SEBI, the company would look to move quickly to list, depending on the market conditions and approvals.

The HAL board has approved several new projects in the coming years which it will be funding from its own reserves. With the government looking to open up the aviation and defence markets in India, grants through the Centrally Sponsored Scheme (CSS) have almost dried up for the government-owned aerospace major.

The development cost of Rs 1,000 crore for the Tejas light combat aircraft MK I has been borne by HAL, along with setting up of a helicopter factory in Tumkur and the Rs 400 crore project to develop a 25 kilo newton aero engine. 

In 2015-16, HAL made a buyback of 12 million shares from the government, amounting to Rs 5,265 crores, including a tax component of Rs 981 crore. “This is what we’ve paid to the government by offering 25 per cent of the equity capital,” HAL finance director CV Ramana Rao said.